Industrialization: Beyond the State–Market Dichotomy
As can be seen, the theories discussed above present the experience of latecomers in terms of their success or failure in catching up at the nation- state level. Th eir starting point for analysis is the dichotomy between the state and the market. However, other types of catch-up industrialization theory have emerged that do not necessarily start their analysis with such a dichotomy and regard the state and the market as elements of a society or a national system.
Abramovitz ( 1986 ) proposed the idea of ‘social capabilities’ to determine the success of a nation-state in catching up with advanced economies by
1 It should be noted that the developmental state approach is based on the experiences not only of South Korea and Taiwan, but also those of Japan (Johnson 1982 ).
testing the convergence among countries in terms of productivity. Suehiro ( 2008 ) followed the social capability approach and illustrated various fac- tors related to catch-up industrialization by putting emphasis on the roles of various actors, including not only government but also local fi rms and multinationals. Hattori and Sato ( 1997 ) also examined the divergence of catching-up patterns between South Korea and Taiwan and identifi ed the social and political factors responsible for these diff erences. 2
Lall ( 1992 ) followed a more technology-centered approach by describ- ing the idea of ‘technological capabilities’ whose level aff ects the speed and success of catch-up industrialization. He argued that technological capabilities at the fi rm level are aff ected by everyday ‘learning by doing’, technological absorption, and innovation, but considered that they are ultimately regulated at the nation-state level. In turn, he conceived tech- nological capabilities at the nation-state level as a function of various insti- tutions and incentives such as education and tax systems. Th e national innovation system approach also has a wide-range view of technological development (Nelson 1993 ).
Th ese approaches point not only to the wider role of the government, but also to various political, economic, and social factors that aff ect the pace, depth, path, and level of catch-up industrialization. By extending this viewpoint to identify the characteristics of social or technological capabilities, various studies have put forth the possible causes and mecha- nisms of successful catch-up industrialization. Th ese have included polit- ical and macroeconomic stability, the role of mid-level organizations such as business associations and trade unions, management know-how, and the level of labor, in addition to the more traditional mechanisms such as the role of government (e.g., industrial policy and government capabili- ties) and market (conditions including free trade).
Real-world trends have also prompted the transformation and diversi- fi cation of catch-up industrialization theory. One of the most notewor- thy trends is the increasing interest in latecomer countries’ innovation (Amann and Cantwell 2012 ). Some studies have actively argued for paths and mechanisms of transformation that progress from learning to
2 Also see the other articles in the special issue ‘Development Mechanisms in Korea and Taiwan’ in Developing Economies , vol. 35, no. 4 (December, 1997).
innovation. 3 An important background behind this trend is the progress of industrialization in South Korea and Taiwan, which had formed the empirical foundation for the catch-up industrialization theories. As South Korea and Taiwan’s catch-up industrialization has approached comple- tion, it has been indicated that acquiring innovative capabilities has become their major challenges instead of learning productive capabilities.
Kim ( 1997 ) has conducted a pioneering work in this line of research.
Based on the South Korean experience, he constructed a distinct model of transformation that captured the progression from learning to innova- tion. His model consists of two stages. In the fi rst stage, the latecomer acquires, assimilates, and improves a foreign technology. In the second stage, the latecomer upgrades from mature and conventional technologies to new and emergent technologies by repeating the three steps (acquisi- tion, assimilation, and improvement). More recent studies like that of Lee ( 2013 ) further concentrated their focus on innovation. He analyzed patent creation at the country, sector, and fi rm levels in South Korea and other latecomers and indicated favorable strategies for latecomer govern- ments and fi rms.
Studies on Taiwan’s experience show a diff erent view on the advanced stage of catch-up industrialization compared with studies on South Korea’s experience. Although Taiwan has also struggled to advance from catch-up industrialization to innovation-led growth, it has depended not only on enhancing technological capabilities, but on creating unique business models. Based primarily on case studies of Taiwanese fi rms, Hobday ( 1995 ) illustrated that a latecomer fi rm can acquire the capa- bility for original brand manufacturing (OBM), namely the capability for innovation, by taking advantage of original equipment manufactur- ing (OEM) and original design manufacturing (ODM). Amsden and Chu ( 2003 ) also showed that Taiwanese fi rms grew into global play- ers through the use of an OEM/ODM business model. Wang ( 2010 ) explained the characteristics of Taiwan’s development by presenting a fast follower model, in which a latecomer can sustain growth by quickly
3 In actuality, learning and innovation cannot be clearly distinguished from each other. For instance,
‘innovation’ in Amann and Cantwell ( 2012 ) includes introduction of technologies that are new to a latecomer. In this context, the two concepts overlap.
learning technologies that were just developed in advanced countries and by producing products with equal quality at low prices. He also indicates that Taiwan’s growth would one day reach its limit if it continued to depend on this model and did not succeed in transforming itself into a complete innovator.